Addressing Scale and Concentration of Land Ownership in Scotland

Land Commission board portraitsScottish Land Commissioner, Dr Sally Reynolds, looks at scale and concentration of land ownership in Scotland:

 

The issue of scale and concentration in land ownership has been an underlying theme and driver of the land reform debate in Scotland for decades. Scotland has an unusually concentrated pattern of land ownership with relatively little public regulation by international comparison.

That these issues remain a public concern is reflected in the current Programme for Government which sets out the expectation for the Scottish Land Commission to ‘review the unusually concentrated pattern of land ownership in Scotland, including the potential risk of localised monopolies in some situations, and its potential impact on the public interest’.

To begin this work we are publishing a discussion paper and research report. The Land Lines discussion paper, independently written by Peter Peacock, asks some challenging questions about fairness, economic opportunity and the risk of localised monopoly situations. It recognises the complex relationship between scale, accountability and productivity and suggests a number of potential interventions.

The research report by the University of the Highlands and Islands and University of Aberdeen, commissioned by the Land Commission, provides a rigorous review of international examples of the way in which countries regulate the scale and concentration of ownership. It considers a range of measures that are commonly used and explores the drivers behind these approaches and what we can learn from them.

For the Land Commission, it is important we get behind the headlines and land ownership statistics to understand the implications and issues that people associate with scale and concentration of ownership. It is not a simple relationship and there is unlikely to be a single answer. But it is directly relevant to our objectives to increase the productivity, diversity and accountability of the way land is owned and managed in Scotland.

Addressing these questions is core to modernising our system of land ownership in a way that people feel comfortable reflects Scotland’s current needs and ambitions. We know this is a topic that provokes strong views and feelings from different perspectives. That is why we want to address it straight-forwardly and openly.

The Land Commission is opening a call for people to submit evidence and experience on the issues associated with concentration of ownership. This is an open opportunity and we want people from all perspectives to submit experience and evidence including individuals, community groups, land owners and managers. We want to understand both the good and bad experiences and examples of issues associated with concentrated land ownership.

The Commission will then use this information to inform its consideration of the issues and also how they can best be addressed. We intend to publish an interim report of our findings towards the end of 2018.

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Land Value Capture – what’s the big idea?

Policy Officer, Kathie Pollard looks at land value capture and how communities can benefit.Kathie final

Land value capture is no unfamiliar concept. It has been in the limelight recently due to the current UK Parliament inquiry into methods for capturing the uplift in land value, and internationally the Lincoln Institute of Land Policy just launched a global campaign to promote it.

In Scotland, we are discussing land value capture in conversations around how land can more widely benefit society. Working out a way to extract the increase in value of land after development is a challenge that local authorities, landowners, developers and policy-makers grapple with, and one that affects the public too. If uplifts in value of land are captured effectively using the right mechanisms, this would have the potential to widely benefit communities, by providing a way of funding the supporting infrastructure, such as roads and schools, required to bring sites forward for development.

Defining Land Value Capture

When land is sold its value is largely determined by how it is used based on its planning permission. For instance, if a plot of land previously allocated for agricultural uses was granted planning permission for residential development this is likely to significantly increase the value of the land and enable the landowner to sell this land at a higher price. To some extent this increase, or uplift, in value is created by a public authority granting planning permission, rather than any actions of the landowner.

 

For this reason, many feel that it’s important to intervene and somehow hold onto this rise in value so that it can benefit the public. Land value capture is an overarching term that refers to exactly this idea: ways to hold onto this increase (or uplift) of land- may it be through some kind of tax, agreement, or other mechanism.

One of the Scottish Land Commission’s strategic priorities focuses on land for housing and development. This involves looking at ways in which we can  we can improve land supply for housing and encourage a more active approach to developing land in the interest of the public. If addressed effectively, land value capture could help tackle a variety of issues ranging from increasing affordable housing and infrastructure.

Ways to capture land value

 

Working out the best methods, or arguably the most viable, for harnessing any uplift in the value of land inevitably stimulates debates: who should benefit from this uplift in land value? How and who is best to negotiate the collection of any cash receipts? Even though the reallocation of value may present some trade-offs, there is a real opportunity to identify mechanisms that allow Scotland to benefit from such an increase in land value. As Tony Crook, John Henneberry & Christine Whitehead (2016) state:  “[Even so,] the evidence suggests that land is different and the generation of large-scale increase in land values when change of use occurs presents the opportunity for taxation or other approaches to enable gains to be captured for the common good.”[i]

Various fiscal and regulatory instruments have been thrown into the mix of options to capture some of that uplift in land value. Successive governments have attempted to use these with varying degrees of success. These range from taxations such as Development Gains Tax and Development Land Tax of the 1970s to levies like the Betterment Levy or Community Infrastructure Levy. Additionally, others have suggested that adjusting the compensation rules for compulsory purchase could make it cheaper for authorities to acquire land. Of course, planning also has a significant role to play and planning obligations can capture some of gains from developed land as income to benefit the local community.

In conversations about the extent to which developers contribute towards infrastructure or affordable housing, through different ways such as planning obligations or taxes, it’s worth bearing in mind the extent to which the ‘public’ and ‘private’ interact in this setting. How much intervention is needed? How is land value capture best regulated? Agreeing which mechanisms are ‘best’ (or most efficient) for capturing the uplift in land value is difficult but not impossible if consensus is achieved. If we are to avoid repeating past mistakes it is vital that we learn from history about the relative successes and shortcomings of previous UK government policies or initiatives that have been attempted.

What are SLC doing about it?

 

Our task in assessing the options to improve land supply for housing and development will be rooted in robust evidence. This is core to our objectives and forms the basis of our work on land value capture. That is why our starting point for investigating options for land value capture is to look at historic attempts to capture land value uplift in the UK in order to learn from experience and recognise the lessons learnt that can help inform policy makers today. SLC is currently working with a team from Heriot-Watt University to do this and will be reporting on the initial findings from this work in the late spring.

In Scotland, if we want the ownership, management and use of land and buildings to work in benefit of the common good, options about how to best harness the gains made from the development of land must be explored and capture the attention of those making the decisions about our land, for the long term.

Keep up to date on our website and via our newsletter to find out about current or recent research opportunities via Public Contracts Scotland.

[i] Crook, A., Henneberry, JM & Whitehead C (Eds.) (2016) Planning Gain: Providing Infrastructure and Affordable Housing, Wiley-Blackwell, Chichester., p.35

Public interest led development

Land Commission board portraitsScottish Land Commissioner, Prof David Adams looks at public interest led development in Scotland:

If we want to provide more affordable housing, generate new employment, create better quality places for people in Scotland, we need to be braver, bolder and be prepared to accept more risk and uncertainty than now.

The state needs to act as the ‘prime mover’, to make development happen, where it would otherwise not do so, or ensure higher quality development, where mediocre development might otherwise occur.

Almost always, public interest-led development (PILD) as it is called – development designed to deliver specific public-policy objectives – involves partnership between the public sector and private sector.

It has a number of advantages over relying primarily on the market, as we mostly do now.

In most cases, it involves land acquisition and assembly by public authorities, often followed by putting in infrastructure – roads, utilities, and so on – so that the land can then be split up into different parcels to be sold on if appropriate.

The creative, visionary regeneration of the Dundee waterfront led by Dundee City Council is probably the best example of this approach in Scotland.

Direct control of land ownership puts the public sector in a much stronger position to ensure development is properly coordinated, well-integrated and well-designed – especially so for major projects and regeneration of large areas of vacant/derelict land – than where this is controlled simply through the planning system.

It also provides a mechanism for the public sector to capture any value uplift from urban development through buying land at a fair price that takes account of all the public investment needed for major new projects, and in due course, recouping at least that investment through land sales.

But it requires particular skills and expertise, such as development experience and market awareness, which are no longer always available within the public sector. By definition, it involves some form of risk sharing with the private sector, and robust risk management.

In the decades immediately after the Second World War, public interest-led development was the model used to build new towns and redevelop many obsolete or bomb-damaged town and city centres.

But it fell out of fashion and we now rely – almost entirely – on the market to deliver.

It has led to a situation where we are not revitalising or enlarging the physical fabric of Scotland’s towns and cities, well enough or fast enough.

As Scottish Government’s Council of Economic Advisers said 10 years ago, much of what has been built in Scotland over the last three or four decades, “is a missed opportunity and of mediocre or indifferent quality.”

By contrast, Sweden, Netherlands and Germany all provide recent, inspiring exemplars of what we could achieve in Scotland with a fresh approach.

PILD requires up-front public investment, which could be financed from the sale of bonds or from other potential investment sources. Scottish local authorities are – in principle – well placed to raise funds at competitive rates of interest.

Moreover, over time, profits from land sales could be used to finance new projects, making the process self-sustaining.

Rather than expecting the private sector to take on all the risk of major urban development, a shared approach in which the public sector plays an important leadership role – especially on major urban regeneration or development projects – is more likely to produce greater benefits for all.

As the two authors of the Land Lines discussion paper The Delivery of Public Interest Led Development in Scotland that’s published today by the Scottish Land Commission conclude, “…Successful public interest led development needs a commitment to doing things differently, a need to be radical and take some risks in order to achieve the goal of achieving places that people deserve.”

We are publishing this paper to open up debate and discussion to see how effective public interest led development can be achieved in Scotland and contribute to making more of Scotland’s land. We are continuing the discussion at our Public Interest Led Development conference to be held on 25 April 2018 in Glasgow.  Planners, developers and investors from both the private and public sector are encouraged to attend to explore how Scotland can effectively deliver PILD.

 

 

David Adams is a Land Commissioner with the Scottish Land Commission. David holds the Ian Mactaggart Chair of Property and Urban Studies at the University of Glasgow. He has researched and published widely on urban land problems and is particularly interested in resolving ownership constraints to urban development and tackling land vacancy and dereliction. He was previously an adviser to the Land Reform Review Group, working especially on the analysis of housing and urban land markets. He is professionally qualified as Fellow of both the Royal Town Planning Institute and the Royal Institution of Chartered Surveyors.